California Real Estate Market Snapshot – April 2011

Since the real estate market has suffered a 30% to 40% decline in prices over the last five years, many are questioning whether owning a home is still part of the American Dream. Let’s unpack the benefits of owning vs. renting. There is no question that renting generally allows greater flexibility if you decide to relocate. But with home ownership, you decide if you want to relocate, not the landlord. In recent years, renters have been surprised to see that rental prices have increased significantly and the supply of rental properties has diminished. This is due to the increase in demand from homeowners who have lost their homes. Other advantages of home ownership include the tax advantages, pride of ownership, and long-term appreciation. Some are questioning the validity of the long-term value of real estate. The U.S. Census Bureau has been recording home prices in the US since 1963. Here are some of the recorded median prices:

1963 – $18,000
1970 – $23,400
1980 – $64,600
1990 – $122,900
2000 – $169,000
2010 – $221,000.

Most things cost more today than they did in 2010; however, home prices stack up well against other investments. Long-term value is even better when you consider the leverage factor. Suppose you buy a home for $300,000 and put 20% down ($60,000). If your home appreciates 5% in a year to $315,000, the increase in your initial $60,000 investment is $15,000 or 25%. When you take into account long-term appreciation, the tax benefits, and the leverage factor, you can see that the American Dream of home ownership still lives on!

Market Report

April, 2011 Current
Period
Last
Period
Last
Year
Month-to-Month
Change
Year-to-Year
Change
Existing Home Sales 497,600 547,080 518,390 -9.1% -4.0%
Median Home Price $271,320 $279,140 $278,190 -2.8% -2.5%
Unsold Inventory Index 7.3 months 6.7 months 6.0 months 9.0% 21.7%
Median Days On Market 64.4 61.8 39.2 4.2% 64.3%
30-Year Fixed Mortgage 4.95% 4.76% 4.99% 0.19% -0.04%

Source: California Association of REALTORS®

1 reply
  1. Patrick Hake
    Patrick Hake says:

    I think owning a home will always be a part of the American dream. There is something nice about being able to lay claim to a piece of property all your own, and to be able to renovate or plant a garden without having to ask a landlord first. And, of course, as an investment, homes are like having a bank all your own with lots of equity that you can use in a time of need.

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